Guidance related to Rule D9.2: Prohibition on the sharing of fees
Rule D9.2 prohibits solicitors and others from sharing
"with any unqualified person any profits or fees or fee derived
from any business transacted by you of a kind which is commonly
carried on by regulated persons in Scotland in the course of or in
connection with their practice"; with certain limited exceptions.
Those exceptions are, broadly, (a) payment of overheads (as defined
in the rule) and (b) retired partners ("managers" in the rule) and
their executors, heirs or representatives; employees who are wholly
employed in the practice unit; public officers in respect of work
done in the course of their duty; and other lawyers - including
lawyers in other jurisdictions - and law centres, citizens advice
bodies and licensed legal services providers and those within
them.
The Professional Practice Committee take the view that the
principal type of arrangement which the rule prohibits is an
arrangement to pay commission for the introduction of business on a
case by case basis. Solicitors are entitled to pay for the cost of
marketing or promoting the practice unit as part of their
overheads. They are entitled to pay a fee to be included on a panel
to whom referrals will be made provided that that fee is not
expressed as a specific sum per referral or as a percentage of the
fees chargeable for referred business. A flat fee is not in breach
of the rules and that may be a fee which is reviewed
periodically.
You are entitled to pay for the provision of services to the
practice unit as part of overheads. Even if the service is provided
by the person who introduces the client, you are entitled to pay
for the service. However the service must be a real service and not
merely the introduction of the client. The Committee has also
decided that the carrying out of a money laundering check by the
introducer would not, however, be a service for which payment could
be made as that is an obligation on solicitors themselves in terms
of the Accounts Rules (Rule B6). Services which have been accepted
as not breaching the rules have included carrying out hearing
tests; taking statements of witnesses; obtaining photographs of a
locus; and completing a detailed client questionnaire relating to
the particular matter in which the solicitor is instructed. The
introduction of capital in return for a percentage of fees would be
regarded as breaching the practice rules, but the provision of loan
funds with a variable rate of interest expressed as a percentage of
the funds advanced would not.
The inclusion of a commission paid to an introducer as an outlay in
a solicitor's fee note - and not a hidden part of the fee - would
not be in breach of the rules however the position would have to be
made clear to the client at the outset in the terms of
business.
Finally solicitors and others are of course entitled to receive
commission from third parties for the introduction of business, but
the existence of such arrangements should be disclosed to the
client although the actual amount of commission does not need to be
disclosed unless the client specifically seeks that information.
Such commission received must relate to any work undertaken by the
solicitors in connection with the business referred. If no work has
been undertaken, unless the commission is of a nominal amount it
should be accounted for to the client.
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